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Fight Organizational Memory Lapse

September 1, 1997
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Related Topics: Downsizing, Change Management, Workforce Planning, Featured Article
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Consider the average business professional today-call her Ann. Ann will graduate from college and start out in an entry-level position at a manufacturing company. A few years later, she'll trade up to a management position in the automotive industry. Maybe that company will have a downsizing, and she'll head to a position at an airline carrier. After a few more years, Ann will take on a director-level position at an accounting firm. And the job-hopping won't stop there.

In an era in which short-term employment and downsizings have become the norm, the average length of a U.S. employee's tenure with any given company is approximately five years. That means most professionals entering the job market today will have seven to 10 employers in their lifetimes.

For the past few years, Big Business has been putting a glossy spin on this development, spurred largely by the downsizing/reengineering bandwagon Big Business has been riding since the early '90s. The extinction of lifetime employment means more room for creativity and more space for mutually beneficial collaborations. Change means that old practices are largely redundant, and new tricks are best accomplished by new, usually younger, blood. An incoming employee's expertise and experience, although acquired elsewhere, will generally compensate for those of the departed employee. That's at least the spin on the situation.

That's not, unfortunately, the reality. The dramatic shift in the nature of employment toward short-term tenure is among the biggest damaging influences on productivity and competitiveness in companies today. That's because short-term tenure translates into short-term organizational memory. And when a company loses its medium and long-term memory, it repeats past mistakes, fails to learn from past successes and often forfeits its identity.

It's a scenario that will likely effect all companies on some level: On the basis of the average five-year U.S. job tenure, companies are employing an increasing number of workers-including managers and senior executives-whose experience at their current organization is limited to 1992 and later.

Organizational memory loss threatens organizational profit gain. Organizational memory isn't just a dry history record. It comprises a company's experiences and organization-specific knowledge, including information about a company's individual culture, management, communications and decision-making style, as well as the detail of job-related events. Hard-won and expensively acquired organizational memory walks out the door every time an employee retires, quits or is downsized.

Organizational memory acts as a company's chief adhesive and lubricant -it's the type of information that both holds a company together and allows it to operate. It's because companies find it difficult to characterize and document in conventional ways that organizational memory so often isn't missed until it's gone. But once it's gone, a number of problems arise.

First of all, organizational memory loss makes new-hire assimilation more difficult. In a time in which long-term employees are an anomaly, there are few people around who can introduce a new employee to the true nature of a company -its culture, tradition and philosophy.

This lack of continuity makes it more difficult for a new hire to get into the swing of things. In fact, anecdotal evidence suggests that it can take up to a year-and often much longer-for new employees to settle into their new jobs and become fully productive. At the current rate of seven employer moves in a lifetime, that means at least 15 percent of workers' lives are now routinely less than fully productive.

Second, the lack of corporate memory can have a hugely negative impact at senior management levels, at which new hires often must make important strategic decisions within months of their appointments. With no established history, this means that in most cases new managers base such judgments exclusively on their previous employers' experiences, cultural environment and market circumstances.

The rate of seven employer moves in a lifetime means 15 percent of workers' lives are routinely less then fully productive.

This continuous assimilation of outside experiences-with each new hire from a different company adding his or her past experiences to the melting pot-can cause the organization to lose its competitive advantage, the very thing that made it special in the first place.

Finally, without organization-specific continuity, companies have scant ability to learn from their uniquely special experiences. Thus, they run the risk of misapplying prior successes or repeating past mistakes and reinventing the wheel.

Companies generally owe their successes to the building of one experience upon another. Without access or reference to the practiced example, a veteran business automatically is denied the experiential advantage it should have over a brand-new or much-younger company.

Lack of continuity damages a company's competitive advantage. Organizational-memory loss is an epidemic wreaking havoc in all types of industries in countries all around the world. In England, at the beginning of the 1989 to1990 housing market collapse, home-loan giant Halifax Building Society, for example, no longer employed any senior managers who could remember firsthand how the organization handled the previous housing market downturn. According to a newly appointed senior manager, the Halifax, West Yorkshire-based company is in a similar position now that the housing market is recovering: There are few employees around who can remember how the organization responded to the last upturn.

In the United Kingdom, aerospace companies are experiencing serious problems in redesign and improvements of aero-engines. An analysis of shared knowledge discovered that because the workforce no longer has the continuity it once had, there's no one around to explain why particular engines were designed in a particular way.

In the reinventing the wheel department, New York City-based management consultants McKinsey & Co. found that design engineers at a U.S. automotive supplier wasted approximately 30 percent of their time resolving problems that already had been unraveled in the company. The group's research at other large organizations led to the conclusion that this phenomenon was a "much more common drain of cash and creativity than most managers imagined."

This cash drain is strikingly emphasized by a 1993 market test. London-based BAA PLC, an airports company that spends approximately 250 million pounds a year on construction projects, decided to compare building costs in another country. It asked U.S. contractors to offer an estimate for building an office block identical to one already under development at Heathrow Airport-a project with labor and material costs similar to those in Britain. The American building came out 32 percent cheaper. A major reason, according to BAA: U.S. architects and engineers spent less time "reinventing solution wheels."

Companies can avoid all the costly mistakes caused by organizational memory loss. That solution is, quite simply, knowledge preservation. Well-applied, the tools of knowledge preservation can combat a range of tenure-related problems: the delayed assimilation of new employees, the brain drain brought on by departing employees, the inability of many companies to learn from their past experiences and the slow integration of acquisitions and mergers.

Through knowledge preservation, a corporate strategist who joins a company in 2005 can have access to the philosophy behind a product line initiated this year. A marketing manager can review an analysis of a prior sales strategy undistorted by time. A new CEO can get acquainted with the ideas of key executives as they planned their way out of the last recession.

Three forms of knowledge preservation-exit interviews, oral histories and learning audits, and corporate histories -can time-capsulize today's executives' philosophies, strategies and mindsets, as well as a company's general mission and culture.

Exit interviews ease the entrance of new employees. Most companies today conduct exit interviews, but few conduct them as an orientation tool for new hires. The problem with conventional orientation processes is that they don't convey the intangibles that new employees need to bring them up to speed quickly-among them an understanding of an individual organization's corporate culture, management and communications styles and the relevant detail of recent events. Most new employees are left to assimilate such intangibles as best they can, usually by osmosis. Leaving new employees to pick them up by themselves is a risky policy, especially if organizations require them to start making important decisions before they fully understand the way the company does business.

Carefully constructed exit interviews can relate these intangibles firsthand and in the process, allow organizations to benefit from employees even after they've left the payroll. Exit interviews speed the assimilation process for new hires and provide a way for them to benefit directly from hindsight.

In the United Kingdom, London-based N.M Rothschild PLC used an exit interview when its director of corporate affairs, John Antcliffe, decided to leave the company before a successor could be appointed. The merchant bank was conscious of the need for job continuity. A key employee in a knowledge-intensive industry was leaving with a wealth of experience. If not captured in some way, that insight would be lost forever.

Conventional orientation processes don't convey the intangibles that new employees need to bring them up to speed quickly.

Two weeks before Antcliffe left the company, he sat down for an exit interview. The project, which took an afternoon to record, was conducted by an outside interviewer with expert knowledge in corporate affairs, HR and corporate culture.

"It fleshed out areas I wouldn't have thought of mentioning to my successor, even had I the opportunity," says Antcliffe. "As a succession-planning tool, it has considerable value for the new entrant and the company. It's an extremely effective way to quickly familiarize one's successor with all the subtle aspects of both a new job and his or her new employer."

Antcliffe's interview was designed to relate to his successor the key issues for which he had been responsible and how he had accommodated Rothschild's individual corporate culture, management, communications and decision-making style. Anecdotal references were an important element, so during the interview, Antcliffe gave his take on job content, major corporate events, internal and external relations, and gave advice to colleagues.

The final transcript was edited and indexed to ensure clarity, continuity and readability, and was made available to the company via computer disc.

Rodney Lonsdale, Rothschild's personnel director, has found the practice extremely helpful for the new hire and the company. "Unless a new employee reads the culture here right, they're going to find it extremely difficult, if not impossible, to be productive. It's a very insightful and efficient way of reflecting the reality of the job and the company, and a well-balanced way of crystallizing all the issues that someone coming into this organization cold needs to know. When the new appointment is made, it'll give the new [hire] a good understanding of how this business ticks."

Oral histories capture the here-and-now of business. A second knowledge preservation technique, comprising oral histories and learning audits, is particularly useful in project management. Consider how often executives wish they knew the decision-making process behind a product, strategy or work process initiated by executives who no longer are with the company.

Oral histories and learning audits solve this problem. Key decision makers record their actions and thoughts on tape at regular interviews during a project's or initiative's creation, producing the equivalent of an oral diary. At the project's end, an edited transcript offers an unequivocal and indisputable chronological and philosophical narrative of how and why individuals made their decisions at the time. This history allows management consultants or human resources professionals to produce a learning audit for the company that specifically identifies lessons that can be applied in the future.

Glenview, Illinois-based Kraft General Foods has preserved similar oral histories for decades. Its archives contain detailed interviews with individuals ranging from past company presidents to plant workers. Employees such as brand manager Linda Crowder access them when grappling with current business problems: In the late '80s, when Cracker Barrel cheese, the brand line Crowder managed, experienced a slowdown in growth, she used the archives detailing Cracker Barrel's 1953 origins to shape a new marketing strategy.

Consider how often executives wish they knew the decision-making process behind [an existing] product.

By reading the transcripts of interviews, she was able to gain the insight of retiree Med Connelly, national sales manager of cheese products from 1959 to 1962, the period when the brand's sales began to take off. "He gave us a perspective we just couldn't get anywhere else," she says. "Our research gave us a sense of what the theory was when Cracker Barrel was first introduced and what we told consumers about the brand in the beginning."

Oral histories are also a key management tool at a government-owned research facility in Los Alamos, New Mexico, the birthplace of the atomic bomb. In the wake of the U.S. government's decision to stop testing nuclear weapons, officials are concerned that the skills weapons specialists have developed will atrophy. In the event that the U.S. government must one day resume testing-and perhaps actually use the weapons again-it's undertaking a massive program to ensure its expensively acquired expertise isn't lost forever.

Retired weaponeers are being brought back to the laboratory for videotaped interviews intended to salvage information about nuclear bombs that can never be gleaned from blueprints and archived documents. So far the Los Alamos researchers have recorded about 2,000 videotapes. "We don't want to press the erase button on our memory and go back to where we were 50 years ago," says John D. Immele, director of nuclear weapons technology at Los Alamos.

Corporate histories put the finishing touches on knowledge preservation. Created in non-PR formats, more formal histories-usually in the form of books-can be used for day-to-day orientation. Perhaps even more useful is their application in helping mergers and acquisitions integrate more quickly and successfully-key when almost half of mergers and acquisitions fail, often because of mutual unfamiliarity and the ethereal culture clash between the parties.

Done appropriately, a corporate history is an effective medium to transmit identity and culture that helps bridge the gulf of misunderstandings between organizations that suddenly have to learn to live together. If each party becomes familiar with the other and knows in detail how each other operates, the process of union will be that much quicker and easier.

One of the pioneers in using corporate histories as a tool to combine cultures was the Houston-based heavy engineering company Cooper Industries. On the company's 150th anniversary in 1983, with much of its growth coming from acquisitions, Cooper Industries printed a total of 75,000 books on its history in both hard- and soft-cover editions for its 31,000 employees. The history was designed to strengthen group identity among incoming employees from acquired companies.

"We saw it primarily as an internal tool to strengthen the identity of our employees with Cooper Industries by preserving and welding together in one book the histories of a large number of formerly independent companies that had been acquired over the years and were now product lines, operations or divisions of Cooper Industries," says T.W. Campbell, vice president of public affairs.

In today's climate of rapid employee change, no company can afford the luxury of rediscovering its own prior knowledge. These three knowledge preservation methods can provide rolling generations of employees with a company's business experience very inexpensively-and can save employers a lot of time, effort and money.

Ann's previous employers would certainly be better off. They'd still have access to the knowledge and experiences she acquired at their considerable expense. Her successors would've been oriented more quickly and more efficiently. And, arguably, Ann's heirs would've been able to apply her experiences more effectively, reducing the incidence of unlearned successes, repeated mistakes and reinvented wheels. If the techniques had been in place before she joined, all her employers also would've had better value out of Ann's brief tenures.

Such a scenario is possible for all companies, and it's a possibility worth remembering.

Workforce, September 1997, Vol. 76, No. 9, pp. 34-39.

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